Dieter Berg on final day of IUMI 2015 conference. Photo courtesy GDV.
Pressurised market, risk complexity and digitalisation are three big challenges, says IUMI president Dieter Berg
By James Brewer
Three main topics emerged from deliberations at the 2015 conference of the International Union of Marine Insurance, said the organisation’s president, Dieter Berg.
Speaking at the close of the event in Berlin, Mr Berg listed first the market environment. The presentation by the IUMI facts and figures committee had shown clearly that the market was coming under pressure: “The margins are narrowing, and even the formerly profitable niches are becoming fewer because the competition is hungry. On the hull side, there was an absence of major losses [in 2014] but we have to be aware of the influence of potential big losses such as the natural disaster in Thailand [floods in 2011], and man-made losses such as the Costa Concordia and Tianjin [explosions that caused many deaths and wreaked huge damage on the Chinese port’s container and vehicle storage areas]. This demonstrates clearly the very volatile nature of our business.”
Non-traditional capacity was coming into the business because there were higher returns than in the financial market, but he was optimistic because of the intensive nature of the service that insurers provided. He added: “It will be interesting to see the consequence of the intense merger and acquisition activity in the market.” Would the formation of stronger insurance players have a moderating effect on the market through the greater need for adequate pricing, or would it increase the pressures on the new and bigger participants to fight for market share with a top-line (i.e. volume rather than profit) strategy?
IUMI in session. Photo courtesy GDV.
Second key point, said Mr Berg, was the aspect of technology and scale. Everything in the maritime industry seemed to be getting huge and complex – “bigger ships and super-size storage areas. This is precisely where we have to show our competence in understanding the complex needs of our clients and exactly understand the exposures we have and clearly define our risk appetite.” Underwriters had to apply know-how in this area to create value for their clients and for shareholders.
Third take-home point was the impact of digitalisation. Insurers had to understand technical implications, and the exposures of their clients.
Mr Berg said that big data in shipping and logistics would have a positive aspect on business, making transport of goods more efficient and less expensive.
Earlier in the conference, Mark Edmondson, chairman of the IUMI ocean hull committee, had spoken of a net increase in capacity in the hull market and a huge shift eastwards.
Mark Edmondson.
Mr Edmondson had categorised insurance overcapacity as one of the ‘new normals.’ He said: “Clearly, major [insured casualty] losses are not going to turn the market. 2014 was an abnormal year [with few major losses] but 2015 has reverted to type.” Figures from Lloyd’s showed that there was no genuine improvement in underwriting results despite the improved risk climate.
Mr Edmondson said that that the frequency of losses was down, but their magnitude increasing.
He stressed that among current challenges, the malicious element in cyber activity was important to bear in mind. Of new cyber products on the market, he said: “The complexity of some of these systems is mind-boggling.”
Mr Berg summed up the Berlin gathering: “I hope that we were able to show IUMI is making a lot of progress and everything we are doing makes us much more than just a conference. We are a making a strategic focus on our projects. We will further strengthen cooperation with our membership and Asia, and strengthen the political influence of IUMI… I declare the 141st annual conference of IUMI closed, ” he said to applause from delegates who praised his handling of the first conference over which he had presided.
